SINGAPORE, January 14, 2025 —As Environmental, Social and Governance (ESG) metrics become a common feature in executive incentive plans globally, companies in the energy, materials and financial sectors in Asia Pacific (APAC) have the highest prevalence of ESG metrics, according to a global study by WTW (NASDAQ: WTW), a leading global advisory, broking and solutions company. Of all the top 400 companies in APAC, 193 disclosed the metrics they use in executive incentive plans, of which three-quarters of the companies (74%) incorporated ESG metrics in their executive pay programmes.
| APAC markets | Percentage of companies that incorporate ESG metrics in their incentive plans |
|---|---|
| APAC average (n = 193) |
74% |
| Australia (n= 50) |
92% |
| China (H-shares) (n = 4) |
25% |
| China (N-shares) (n = 7) |
29% |
| Hong Kong (n = 14) |
71% |
| India (n = 18) |
56% |
| Japan (n = 50) |
74% |
| Malaysia (n = 11) |
45% |
| Singapore (n = 39) |
82% |
Compared to the global average of 81%, companies across various regions had little change in the prevalence of ESG metrics used within executive incentive in 2024, including in North America (77%) and Europe (94%), although APAC is the only region that saw an increase of 2% over the previous year.
| Regional breakdown | Percentage of companies that incorporate ESG metrics in their incentive plans |
|---|---|
| Global average | 81% |
| North America (n = 560) |
77% (no change compared to 2023) |
| Europe (n=311) | 94% (no change compared to 2023) |
| Asia Pacific (n=193) | 74% (+2 percentage point from 2023) |
WTW’s analysis of the top 50 listed companies in the respective markets, Australia, China, Hong Kong, India, Japan, Malaysia and Singapore, also shows that companies in energy, materials and financial services sectors continue to be the ones with the highest prevalence of ESG metrics. The highest proportion of ESG metrics used in long-term incentive (LTI) plans are companies in the industrial sectors.
ESG metrics are still most frequently used in short-term incentive (STI) plans, with only a small number of companies implementing such metrics in LTI plans in addition to their STI plans. Almost two-thirds (64%) of companies included at least one ESG metric in their short-term incentive (STI) plan, an increase of 4% from a year ago. However, only 30% of companies used ESG measures in their LTI plans. This is materially lower than European companies, which incorporate long-term carbon emission goals in their LTI plans.
Social metrics remain the most popular ESG metric category used globally, with 62% of APAC companies including that in their executive pay plans, an increase of 8% in 2024. Additionally, 59% of companies have used diversity and inclusion measures in their incentive plans. However, only 42% of companies in APAC used environmental metrics, which is a large difference compared to 85% companies in Europe. Among the APAC companies, 30% incorporated GHG or carbon emission measures including Scope 3 emissions.
“Asian companies will do well as they continue to drive the right behaviours by ensuring alignment between ESG strategy and executive incentives.”
Shai Ganu | Managing Director and Global Practice Leader, Executive Compensation and Board Advisory, WTW
“The disclosure and prevalence of ESG metrics used by companies in APAC continue to vary and are influenced by the level of disclosure requirements and institutional investors’ expectations in each market,” said Shai Ganu, Managing Director and Global Practice Leader, Executive Compensation and Board Advisory, WTW. “While markets such as Australia, Japan, and Singapore continue to have high prevalence of ESG measures in executive incentives, we haven’t seen significant change over the past year. Going forward, geopolitical shifts may prompt slowdown in adoption of climate and DEI measures, particularly in North America. Nevertheless, Asian companies will do well as they continue to drive the right behaviours by ensuring alignment between ESG strategy and executive incentives.”
This research study analysed public disclosures of 1230 companies globally, of which 1057 companies disclosed measures they use in executive incentive plans. The sample includes S&P 500 companies in the US; TSX top 60 in Canada; 320 companies across eight major European indices, including the FTSE 100; and the largest 50 companies across each of the seven markets in the Asia Pacific region. These include companies in communications services, consumer discretionary, consumer staples, energy, financials, healthcare, industrials, IT, materials, real estate and utilities sectors.
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